Exploring FHA Assumable Mortgages for First-Time Homebuyers

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As a first-time home buyer, you’re pretty excited and more than a little nervous about this process. That’s totally understandable! Buying a home in Colorado Springs, CO, or elsewhere in Colorado is a considerable investment: completely life-changing. However, it can also be unnecessarily expensive for first-time home buyers if they don’t understand their loan benefits or don’t research FHA options, such as assumable mortgages, when buying a new home.

FHA home mortgages provide many unique benefits that make affording a home much more accessible. Home loans like these help new home buyers purchase a perfect house and can streamline the lending process considerably. After finding a new home, you must carefully understand FHA assumable mortgages and the powerful benefits they can provide you. Thankfully, our team at Assumption Solutions is more than ready to help you out here!

We can help first-time buyers like you understand these loan types and their many benefits. Sadly, many people either don’t understand these home mortgages or don’t have the right team to explain them. Well, forget all that because our team is ready to discuss FHA assumable mortgages with you. Here’s what you need to know about them, including their nature, the ways they help you, and how to apply for one. We’ll see you at the end with tips!

A man and a woman are standing over a doormat that says "first-time buyer" next to moving boxes and plants.

What are FHA Assumable Mortgages?

FHA assumable mortgages are unique FHA home mortgages that make affording a home much more manageable for Colorado Springs, CO, first-time home buyers. Like all FHA loans, they’re insured by the Federal Housing Administration. They’re designed to protect lenders and allow them to offer loans to borrowers who might not otherwise qualify. For example, new home buyers who’ve never purchased a house may need these loans. 

Assumable mortgages are a unique variation that lets people buying a new home take over the seller’s home loan at the same interest rate, balance, repayment period, and all other terms. In other words, they provide beneficial home loans that make finding a new home easier. Rather than having to sort through dozens of different mortgage types, you can just take right over from the previous homeowner and get a new home at a surprisingly affordable rate. 

As you can imagine, the benefits of FHA assumable mortgages make them one of the most popular options from Assumption Solutions in Colorado. We can discuss the unique loan benefits of these mortgages and make it easier for you to qualify for them. Not sure how to get started? We have mortgage assumption classes that should make this process even easier for you and other first-time home buyers in El Paso County. 

There's a red "for sale" sign outside of a home with blue sky and green grass.

The Benefits of FHA Assumable Mortgages 

FHA loans and assumable mortgages provide many advantages that make them an excellent option for new home buyers. First-time home buyers, in particular, benefit from these home loans and their setup. Here are reasons why you might want to consider these popular home mortgages when buying a home in Colorado Springs, CO, with Assumption Solutions: 

  • Smaller Down Payments: FHA assumable mortgages often have a lower downpayment. Sometimes, they’re as little as 3.5% of the purchase price! As a result, finding a new home is a lot easier because you won’t have to pay as much to start. 
  • Easier to Qualify: Traditional home loans often have stringent requirements. However, FHA loans, including assumable ones, are available for lower credit scores. Even people with a 580 rating might qualify if they provide a higher downpayment.
  • Better Interest Rates: Typically, most FHA loans are available at lower interest rates. That’s particularly true for assumable loans! For example, you might pick up a house with a fixed interest rate far lower than the current minimum, saving you lots of money.
  • Faster Transfer: Buying a new home is often a lot of “hurry up and wait” frustration. However, an assumable loan is quicker because you’re simply taking over an existing mortgage. As a result, it’s simpler to take on a new home without excessive waiting.
  • Lower Closing Costs: Closing costs can be worth thousands of dollars or more and add considerably to a mortgage cost. However, assuming an FHA loan may decrease the closing costs considerably and make finding a new home more affordable.
  • MIP Removal Possibility: When getting an assumable loan, your mortgage insurance premium (MIP) could be removed. That occurs if the loan you assume originated before July 3rd, 2013, and if the balance is lower than 78% of the original.
There's a set of handing over a set of keys to another set of hand to celebrate new homeownership.

How to Qualify for an FHA Assumable Mortgage

Whether you’re a buyer or a seller, FHA assumable mortgages can provide many advantages. Since we’re examining these loans from a buyer’s perspective, let’s look at the qualifications first-time home buyers must meet when finding a home with this home loan type:

  • Minimum Credit Score: You must have a credit score of at least 580 to qualify for the 3.5% downpayment. If your score is between 500 and 579, you must pay 10%. Make sure you talk with Assumption Solutions about this process before beginning.
  • Suitable Debt-to-Income Ratio: Your debt-to-income (DTI) ratio must be no higher than 43% if you want to qualify for these loans. That means the money you pay must be 43% or less of your earnings. Otherwise, you might have to pay a higher downpayment.
  • Income Verification: Lenders transferring mortgages need proof of steady employment and a consistent income for at least the last two years. This verification may include pay stubs, tax returns, or other types of financial information to verify your earnings.
  • Property Demands: Any property transferred with an FHA loan must pass their safety standards. These include a visit from an approved appraiser who checks for security, safety, and building soundness. If they pass, you can apply for a loan!

Step-by-Step Guide for Applying to an FHA Assumable Mortgage

Applying for FHA assumable mortgages in Colorado Springs, CO, requires working with Assumption Solutions to figure out how these Colorado home loans help you and how they make affording a home accessible. First-time home buyers interested in buying a new home should follow these steps after knowing the benefits of FHA assumable mortgages: 

  • Get Pre-Approved First: Pre-approval is an essential first step that involves reviewing your finances to determine your loan eligibility and potential budget. Doing this first helps ensure you qualify for FHA assumable mortgages before attempting this process.
  • Apply for the Loan: New home buyers will then complete their loan application using information like pay stubs, tax returns, bank statements, employment verification, and other records. This step helps make finding a new home faster and more efficient.
  • Go Through Property Appraisal: After understanding the benefits of FHA assumable mortgages and other loan benefits, you’ll schedule a property appraisal that ensures it meets HUD standards. This step also helps assess its market value. 
  • Underwrite the Mortgage: At this point, the lender underwriter will review your application for a new home mortgage and assess your risks. This process includes gauging your credit, income, and the property’s value to ensure the best results.
  • Wait for Approval and Closing: Once you’re approved, you receive a commitment letter before closing. Closing and finishing, including preparing the proper documents, takes a little time. When completed, you own a home — not bad!

Applying for home mortgages like these can make affording a home more accessible for those who qualify. Buying a new home using this mortgage type can help first-time home buyers get into a new home more quickly and efficiently. New home buyers like you should check out our FAQ on these loan benefits to make finding a new home more enjoyable. 

Let Assumption Solutions Set Up Your FHA Assumable Mortgage

Assumption Solutions can help residents of Colorado Springs understand Colorado laws about FHA assumable mortgages, other types of home mortgages, and any home loans that can help first-time home buyers get the house they want. We work directly with the FHA on assumable mortgages to make affording a home much more accessible. So, if you live in El Paso County and are looking into buying a new home, contact us at 719-527-3380.


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